It’s been several weeks since we last heard about restrictive laws or bills against the cryptocurrency sector in the United States. That was without counting on the proposed “America COMPETES Act of 2022”, whose theme is centered on maintaining American economic superiority against China. A provision of this bill would allow the US Treasury to ban an exchange platform if there are suspicions of illicit activities.
Could the US Treasury soon ban an exchange platform?
In 2021, US lawmakers passed numerous laws to revive the economy hit hard by the Covid-19 pandemic. Now, although they have nothing to do with the world of blockchain and cryptocurrencies, these bills have regularly incorporated provisions relating to the sector.
One example is the Infrastructure Bill, passed last November, which provides for new tax obligations for certain players navigating crypto-assets. A task force under President Biden would also like to see a stablecoin issuer treated as a bank.
Today, it is the draft version of a bill that is in the news. Presented by a committee on science, space and technology, the draft provides for numerous measures to counter the emergence of the Chinese economy, including elements relating to cyber security.
However, one provision would indirectly affect the cryptocurrency sector.
6/ While not full due process, these limitations at least alert the public and gives the public some opportunity to comment on a special measure’s merit or constitutionality.
– Jerry Brito (@jerrybrito) January 26, 2022
In short, this provision would allow the US Treasury to shut down an exchange platform outright, according to Coin Center. In the event of transactions deemed illegal or dubious, the Treasury Secretary would indeed have the possibility of banning the financial intermediary to which this money has passed.
A provision that applies well beyond cryptocurrency trading platforms
The disputed provision does not specifically target digital assets. Instead, it applies to all regulated financial institutions in the United States in order to combat international money laundering.
Today, the Secretary of the Treasury has the power to close any account that she believes is being used for money laundering outside the US. However, there are safeguards: the respondent must be notified in advance to make representations and any closure is limited to 120 days. It is therefore more of a freeze than an outright closure.
The proposed bill would remove these safeguards and add the ability for the Secretary of the Treasury to define the concept of transfer of funds to suit the situation. In other words, the provision would allow the Treasury to prohibit or condition any financial transaction that it deems questionable. For some observers, this is an authoritarian approach that will not solve the problems associated with money laundering.
Coin Center sees it as a real censorship aimed particularly at crypto-currencies, as their nature is global in nature. A transaction between two Americans can be validated in Iran or China. However, it is necessary to recall that this provision would apply to all financial transactions and not only to crypto-assets.
Platforms and cryptocurrencies in the crosshairs of the US Treasury
Although the two are not related, this bill follows the annual Chainalysis report on crypto-crime. Now, from this report, each side takes the figure that interests them.
The defenders of crypto-currencies note that illicit transactions account for only 0.15% of all crypto-currency transactions. As for the proponents, they take issue with the $14 billion in illicit transactions, a 79% increase over 2020.
They don’t seem to see that the main tool for money laundering remains the greenback issued by the very serious US Federal Reserve and not Bitcoin (BTC). But Treasury Secretary Janet Yellen prefers to emphasise her concern about the role of cryptocurrencies in illicit activities.
Other politicians have supported Yellen’s position and even gone further, pointing to the environmental impact of cryptocurrencies. These people seem to care more about the environmental impact of digital assets than the much larger impact of the US as a whole.
It now remains to be seen whether this provision was actually written to indirectly target cryptocurrencies and whether it will be finally adopted.
